Regional water supplier offers county $350 million

GIG CONAUGHTON - Staff Writer

The Metropolitan Water District, Southern California's biggest
water supplier, voted Tuesday in Los Angeles to give San Diego
County up to $350 million to help fulfill local dreams of turning
seawater into drinking water.

San Diego County Water Authority officials praised the decision
—— but said there are still questions about whether the agency will
take the cash.

That's because the money has been tied to a "loyalty oath"
requiring agencies to promise they'll never challenge
Metropolitan's rate system in court or the Legislature.

Nevertheless, Water Authority officials who have chased the $14
million-a-year, 25-year-long subsidy for several years applauded
the vote.

"This is a positive step, a real positive step," said Bernie
Rhinerson, Water Authority board member and chairman of its
desalination committee.

The money would be used to reduce the cost of the water that a
proposed seawater desalination plant in Carlsbad would produce,
making it cheap enough for the plant to be feasible.

But Water Authority officials have said that taking the
desalination subsidy —— a decision that won't have to be made for
several months —— could kill a chance to save San Diego County
water ratepayers $2 billion, officials say.

In December 2004, Metropolitan board members narrowly approved a
policy stating that any agency that wanted Metropolitan subsidies
must promise never to challenge Metropolitan's rate system in court
or the Legislature.

The Water Authority "rents" Metropolitan pipelines to move the
Imperial Valley water to San Diego County residents. And Water
Authority leaders believe Metropolitan is overcharging for that
rental —— an accusation that Metropolitan disputes and that appeals
courts have previously rejected.

The Water Authority, meanwhile, is less than two years into a
45- to 75-year-long deal to buy billions of gallons of water from
Imperial Valley farmers.

And because the Imperial Valley deal is set to run for up to 75
years, Water Authority officials have said they believe a
successful challenge of Metropolitan's rate structure could shave
$2 billion off the cost of their deal.

At the same time, Water Authority leaders have said seawater
desalination is ultra important to San Diego County's future water
supply.

They may not be able to build a seawater desalination plant in
Carlsbad without the Metropolitan subsidy, Water Authority
officials have said.

The Water Authority is still negotiating with Connecticut-based
Poseidon Inc. to build a plant at Carlsbad's Encina Power Plant
that would turn 50 million gallons of seawater a day into drinking
water.

Poseidon has reached a deal to build the plant with the city of
Carlsbad. But most experts say the plant cannot be built without
the Water Authority's involvement because Carlsbad cannot use all
the water the plant would produce.

On Tuesday, Metropolitan board members approved granting San
Diego County and four other Southern California water agencies
subsidies of $250 for every acre-foot of water their proposed
seawater desalting projects would produce for up to 25 years.
Metropolitan's ad hoc desalination committee recommended the full
board approve the subsidies last month. An acre-foot of water is
325,900 gallons, enough to sustain two households for a year.

Water Authority officials say the subsidy would cut the cost of
the water the Carlsbad plant would produce from about $800 per acre
foot to $550 per acre foot —— close enough to the $443 per
acre-foot cost of imported water to make desalination feasible.

After Tuesday's meeting, Metropolitan spokesman Bob Muir said
board members did not discuss the rate-structure issue.

Rhinerson and Bob Yamada, the Water Authority's desalination
program manager, praised the vote to award the subsidies.

"It ($350 million) is a lot of money," Yamada said. "We're
pleased. … This is the first time there's been specific recognition
of the individual projects, and we're happy about that."

Yamada and Rhinerson said the Water Authority won't have to
commit to taking Metropolitan's subsidy until they reach a deal
with Poseidon.

Yamada, meanwhile, said that gave the Water Authority time to
push Metropolitan to readdress the rate-structure challenge
issue.

"That has been an issue for us, and it will continue to be an
issue for us," he said.

Yamada said he believes that Metropolitan board members plan to
talk about the rate-structure loyalty oath in the coming
months.

But Rhinerson said the rate-structure controversy may be
moot.

He said finding water-starved San Diego County a new supply by
turning seawater into drinking water was so important that it
should be pursued —— even if Metropolitan would not drop its
rate-structure "loyalty" demand, and the Water Authority turns down
the subsidy.

"The subsidy is important," Rhinerson said. "But we shouldn't
hinge our whole decision on the future of desalination on whether
Metropolitan was going to support it. We need to press forward
regardless."